FOMC Minutes: Taper talk might start sooner than expected – UOB

Alvin Liew, Senior Economist at UOB Group, assesses the FOMC minutes of the April 27-28 meeting (Wednesday).

Key Quotes

“The key highlight of the 27-28 April FOMC policy meeting minutes was a number of the participants “suggested that if the economy continued to make rapid progress toward the Committee's goals, it might be appropriate at some point in upcoming meetings to begin discussing a plan for adjusting the pace of asset purchases”. However, it is noted that this view came ahead of the disappointing April jobs miss and that the US economy remains more than 8 million jobs below the pre-pandemic level (of Feb 2020) coupled with a surprise uptick in unemployment rate.”

“While the latest FOMC meeting minutes provided hints that some Fed officials are thinking about beginning the taper conversation, they remain in the minority and it is not signaling a Fed policy shift or any impending Fed policy tightening. Recent commentary from various FOMC voters remain aligned with FOMC Chief Powell to keep the current accommodative policy stance intact despite the increasingly positive US economic outlook.”

“Our base case remains for the Fed to stay on hold for most of 2021, at least, and the taper discussion will only start in late 2021/early 2022 unless the Fed indicates a clear change in its policy stance. A risk event to watch will be the August Jackson Hole symposium where some speculate it could be the platform that the Fed may make the tapering announcement. We still hold the view that the Fed will keep policy rates at the current 0.0-0.25% region at least until 2023.”